Setting up an SMSF fund

[Fab]

Hi,

I am wondering what is envolved in setting up an SMSF fund for my wife and myself. I understand we can have both account into 1 SMSF fund.
We have each about $45 000 in our current MTAA account.

Also once this is setup where can we get the best death and permanent disabily insurance. MTAA currently offers about $120 000 worth of benefit for $1.20 per week which is quite cheap.

I like the idea to have control over my fund and believe I can generate a better return than the 20% currently generated by my fund

 

[BradK]

Re: Seting up an SMSF fund

I like the idea to have control over my fund and believe I can generate a better return than the 20% currently generated by my fund

Not if you keep buying PDN my friend

 

[Fab]

Re: Seting up an SMSF fund

Not if you keep buying PDN my friend

Indeed but then it depends when you bought PDN. I bought them when they were $2.45 so I will loose on them anytime soon.
Also I bought a fair bit of SDL @ 0.13 cents . It would have been nice having that in an SMSF

 

[billv]

Fab

Have you ended up starting up a SMSF?

 

[Julia]

Billy, I've just tried to reply to your PM but have been advised "Billy has chosen not to receive PM's."
Not sure why you'd ask a question and then not want the answer.

 

[billv]

Sorry Julia
There was a problem with my registration.
It's fixed so you can reply now.

 

[ROE]

Hi,

I like the idea to have control over my fund and believe I can generate a better return than the 20% currently generated by my fund

That is an outstanding return if you can do it year after year, only a handful of people on the planet can consistently do that

don't be fool by randomness thinking you can get better than 20%
you may end up with -20% .

 

[billv]

don't be fool by randomness thinking you can get better than 20%
you may end up with -20% .

Good point, the only reason I started my SMSF is to be able to buy properties in a capital gains tax free environment. In fact it doesn't make sense buying anything other than our PPOR outside super.

 

[nulla nulla]

If you want to spend the rest of your life collating documentation to comply with regulations for the reporting side of self managed superannuation funds and incur the cost of independent accountants/audits go for it. Otherwise a good industry managed superfund can save you thousands of dollars, thousands of hours and plenty of headaches.

 

[waza1960]

Can't agree Nulla Nulla I have had smsf since 2001 and i have never regretted it .I only spend about 2 days per year on paper work and my accountant charges around $900/year to audit our fund which has four family members

 

[Duckman#72]

Can't agree Nulla Nulla I have had smsf since 2001 and i have never regretted it .I only spend about 2 days per year on paper work and my accountant charges around $900/year to audit our fund which has four family members

Hey Waza

Quick question. Is that $900 just for the audit or does the accountant perform both both audit and accounting duties for that fee? In other words - who prepares and lodges your ITR?

Speaking of industry funds Nulla Nulla - Alan Kohler wrote a very good article the other day advising anyone who is in an industry fund to ......"get out now". That is a direct quote. His argument being that over the next couple of months industry funds are going to have large sections of their property and infrastructure investments revalued. And revalued downwards in a BIG way. Industry funds don't comply with the accounting regulations of other commercial funds(in the way the average Joe knows it) and "smoothing" of super returns takes place. In the good years, they hold money in reserves and don't hand it all back and then hold on and "add it in" during the bad years. Well according to Kohler if you transfer into a Cash portfolio within your industry fund you could be saving 10-15%.

Duckman


Duckman

 

[Prospector]

We moved into an SMSF over 10 years ago and have not regretted it for an instant. Once you know the limitations on investments, and they are actually quite logical, then the ability to absolutely control where your best investments lie is a great feeling. And any mistakes that are made are yours, not some highly paid investment person to whom you are just a number. No-one pays more attention to your financial needs than yourself!

 

[Julia]

Good point, the only reason I started my SMSF is to be able to buy properties in a capital gains tax free environment. In fact it doesn't make sense buying anything other than our PPOR outside super.

So presumably you are in pension phase if you're not paying any CGT?

We moved into an SMSF over 10 years ago and have not regretted it for an instant. Once you know the limitations on investments, and they are actually quite logical, then the ability to absolutely control where your best investments lie is a great feeling. And any mistakes that are made are yours, not some highly paid investment person to whom you are just a number. No-one pays more attention to your financial needs than yourself!

Couldn't agree more, Prospector. I've found it really easy to manage, no difficulties at all other than a shonky accountant who is now well and truly history and will soon be facing a disciplinary hearing from CPA Australia.
The record keeping is no problem and any restrictions are far from onerous.
I would never go back to letting anyone else manage any part of my financial situation.

Duckman, I heard Alan Kohler's remarks too. I guess in opposition someone disagreeing could say that to move to cash now is to crystallise losses.
Sounds as though there are going to be losses whichever way an industry fund investor goes.

 

[billv]

So presumably you are in pension phase if you're not paying any CGT?

No I am not in pension phase but I don't intend to sell for at least another 10 years so by that time I'll be able to switch to a transition to retirement plan

 

[DB008]

Just a question relating to brokerage on SMSF's.

If the Goverment wanted to make your returns better, than why not make it so that the brokerage they charge SMSF same as what most big super funds pay.
I very, very much doubt that _ _ _ _ _ _ _ ( <- insert big super fund name here, eg;MTAA) would be paying $30 brokerage on a 10k trade (if hypothetically they did a trade that small).
So, why aren't SMSF's given an exception to brokerage by the ASX to trade with less cost? Instead of varying amounts of brokerage charged by the many trading houses in Oz, why not standardise brokerage for SMSF's?

 

[wonderrman]

Just a question relating to brokerage on SMSF's.

If the Goverment wanted to make your returns better, than why not make it so that the brokerage they charge SMSF same as what most big super funds pay.
I very, very much doubt that _ _ _ _ _ _ _ ( <- insert big super fund name here, eg;MTAA) would be paying $30 brokerage on a 10k trade (if hypothetically they did a trade that small).
So, why aren't SMSF's given an exception to brokerage by the ASX to trade with less cost? Instead of varying amounts of brokerage charged by the many trading houses in Oz, why not standardise brokerage for SMSF's?

Because big superfunds purchase a lot more then 10k when they trade. More like 10m. Just like institutions, they buy more so they pay less. Thats the way it works. You can't expect brokerage's to charge you $5 or $10 for a trade worth 10k. If you want cheap prices use Interactive Brokers.

 

[trading_rookie]

Good point, the only reason I started my SMSF is to be able to buy properties in a capital gains tax free environment. In fact it doesn't make sense buying anything other than our PPOR outside super.

No I am not in pension phase but I don't intend to sell for at least another 10 years so by that time I'll be able to switch to a transition to retirement plan

I see now why the Super Industry wants ppl to complete a test before allowing them to start up their own SMSF.

If your investment property owned by your SMSF makes a capital gain every year for the next 10 years your SMSF will be expected to pay the ATO 15% tax for every one of those years. I'm pretty sure the rent you receive is also taxed at 15% - that's the incentive of super, flat tax of 15% as opposed to what tax bracket you fall into.

This is no different to the industry or retail funds - we're all paying 15% tax on any gain our super makes.

 

[billv]

I see now why the Super Industry wants ppl to complete a test before allowing them to start up their own SMSF.

If your investment property owned by your SMSF makes a capital gain every year for the next 10 years your SMSF will be expected to pay the ATO 15% tax for every one of those years. I'm pretty sure the rent you receive is also taxed at 15%.

You only pay tax on capital gains if you sell early and only of you are under 60yo.
The rent and monthly contributions are taxed @ 15% but these will be offset by the property depreciation amount
and you could also use tax credits from shares to lower your tax further

 

[Wysiwyg]

If your investment property owned by your SMSF makes a capital gain every year for the next 10 years your SMSF will be expected to pay the ATO 15% tax for every one of those years.

You obviously misunderstand how a capital gain is taxed (on disposal of the asset)

I see now why the Super Industry wants ppl to complete a test before allowing them to start up their own SMSF.

 

[Julia]

I see now why the Super Industry wants ppl to complete a test before allowing them to start up their own SMSF.

If your investment property owned by your SMSF makes a capital gain every year for the next 10 years your SMSF will be expected to pay the ATO 15% tax for every one of those years

That doesn't sound right to me. I haven't looked into this because I don't own property in my SF but why would CGT be treated like this within a SMSF when it isn't in the ordinary sense?

Can you provide a link showing the application of CGT in the way you describe?